David R. Henderson  

Friday Evening Audio: Detective Radio

PRINT
Debate Training: Deserve to Wi... Hayek made simple...

A Ph.D. economics student named Garrett M. Petersen interviewed me last week about inequality. He has done a series of interviews with economists on various topics and Garrett comes prepared. His questions and the thoughtfulness behind them are head and shoulders above what I normally get when questioned on talk radio. Garrett is a student at Simon Fraser University in British Columbia, Canada.

Here's the interview. It goes about 43 minutes.

Some highlights:
1:35: How far do Kindle readers get in reading Piketty's Capital in the 21st Century?
2:54: Obama's passion
4:00 to 9:30: Relationships between income inequality, wealth inequality, and political inequality
9:40 to 12:00: My response to Stiglitz's claim that much of the wealth at the high end is due to political power
12:30: How people throughout the distribution have seen their real income and wealth increase in the last few decades
13:30: Alan Reynolds's point about the cutoff for the top 1 percent
14:25: Michael Boskin's point about inflation over-adjustment
15:30: The implications of households splitting
17:30: Are we richer than Rockefeller?
18:40: Taxing people in the 1% more heavily to give to people below that
20:40: Chainsaw millionaire vs. Congressional privilege seeker
23:38: Piketty is non-plussed by a question from someone in an American audience
24:20: Piketty never says why we should care about inequality even though he thinks it should be the central question in economics
26:18: Do low-income people care about inequality or about low income?
30:18: Rognlie's talk at Brookings
31:10: Garrett and I differ (I think) about wealth in housing
33:40: Global inequality is decreasing
35:30: What should people be thinking about, if not inequality
39:20: Peter Jaworski's story about his business ethics class

BTW, Garrett does great notes at the bottom of the web page.


Comments and Sharing






COMMENTS (10 to date)
Mark V Anderson writes:

As always, David, you make good points. But the interviewer definitely gave you softball questions, and even added points that didn't occur to you (such as global inequality). I don't know that softball questions make for the best interview. I'd like to hear intelligent questions that focused on the weaknesses of your opinions. He had a few, but not many.

I also don't buy your comment that the increasing cost of housing benefits home-owners that don't move. You could say that others are harmed because they can't get this housing, but the incumbent owners don't have an increase in benefits. If the implicit rent increases, that just means that housing inflation costs have increased, not the value.

Kevin Erdmann writes:

That's funny. I had the opposite reaction as Mark, when I heard Garrett's comment on housing, I though, oh, that's wrong, and that David's response was correct. Most people would probably agree with Mark & Garrett. It's such a complicated topic.

Although, even though I think David is correct as a starting point, there are still interesting issues there because of inertia and endowment effects. The household does have higher nominal imputed income as a result of the higher imputed rent. But, we could think of it as being a situation where they previously had high consumer surplus, and if they stay in the house, they are simply trading imputed income for consumer surplus, so that the total utility to them is unchanged. Maybe that's where the different intuitions come from.

David R. Henderson writes:

@Mark V Anderson,
As always, David, you make good points.
Thanks.
But the interviewer definitely gave you softball questions
Generally true. But I think you drastically understate how hard it is to give softball questions. The questions he chose show that he had thought about the issues clearly. Try being interviewed on radio sometime and see how often you think the interviewer did a good job of asking questions, softball or hardball.
and even added points that didn't occur to you (such as global inequality).
He did add that. I’m not clear why you see that as a problem. Actually, though, the point did occur to me: it was in the speech I gave in Switzerland.
I don't know that softball questions make for the best interview.
Depends on the alternative.
I'd like to hear intelligent questions that focused on the weaknesses of your opinions.
I agree.
He had a few, but not many.
Which ones?

David R. Henderson writes:

@Mark V Anderson,
Question for you, if you have ever watched a lot of interviews of authors on C-SPAN: who do you think is the best interviewer?

Mark V Anderson writes:

I have not watched many interviews on C-SPAN, so I don't know the interviewers. I confess that I am speaking pretty much from ignorance in that I listen to very few interviews (I much prefer print). I gave you my impressions, but it is true I don't know a lot about the process. Maybe you should ignore my comments.

David R. Henderson writes:

@Mark V Anderson,
OK, so then this won’t mean much to you because you haven’t watched it a lot. My favorite interviewer is Brian Lamb. The reason is that he just plays it straight and gives “softball questions,” but softball questions that show that he has read the book he’s asking about. He draws out a lot of information and it turns into a really interesting conversation. That’s what I think Garrett did.

Mark V Anderson writes:

I can see there is a place for softball questions and another place for hard questions. One of them to let the interviewee bring out their point of view to its fullest, and the other to see how the interviewee handles the critics' questions. Both can be valuable in different situations.

SaveyourSelf writes:

Brilliant interview, David. Your level of preparation and polish was amazing. I seriously wonder how you do it. You made it seem so easy, like magic. Well done.

Your discussion provided much to think about:

Around 18:45 you said, "If you could tax people in the 1% and not badly distort their incentives and give it to people below that then, yeah, people below that would be better off. I think you would distort the incentives..."

This statement appears true at first blush, and probably is true in the very short term, but in the medium and long term it is false. The distortion of incentives of the top 1% [which is what I think you were referring too] is real but I suspect is the smaller concern. It is the distortion of incentives of the BOTTOM 99% created by the "redistribution" that chiefly undermines any positive outcomes created by redistribution. Changes in behavior of the top 1% are unlikely to matter much given that they are such a small group--even if you assume they have an influence on the economy greater than their size implies. Furthermore, taking from the few to give to the many is theft, regardless of how small or wealthy the minority being robbed or how large or “poor” the majority benefiting. Theft is always unjust—which is to say, someone is getting hurt. Adam Smith argued that Justice was the minimum level of morality required to maintain a society. So however good the outcomes predicted for the bottom 99% from redistribution, could it possibly be worth degrading or even destroying society? No! Injustice means someone is being harmed. Harm without recourse implies the victims are outside the citizenship agreement. Only those included in the citizenship agreement are restrained from violence against other citizens by the agreement. Injustice on such as scale is the first move in a game that ends in war. Violence, especially war, has such negative economic outcomes as to guarantee a profoundly negative economic calculation even when balanced against the improvement in income experienced by the "bottom 99%" over any length of time.

Separately, I want to thank you for mentioning the bottom 1% in your discussion. I did not realize that there was an 80% correlation between the bottom 1% and being in prison. It makes me wonder if they are in the bottom 1% because they are in prison or they are in prison because they are in the bottom 1% or perhaps the two conditions are only randomly correlated and instead caused by some other factor. You seemed to be arguing that the drug war was that causal factor. That is a really interesting idea which you drew from another correlation that more than 50% of the prisoners were sentenced for drug law violations. I would like to add some complexity to your assertion. I will argue that the incentives created by “redistribution” for poor people are causally associated with their drug use. After all, Society assumes most of the risks from drug use by guaranteeing medical care for the health complications associated with drug use. Lungs don’t work from smoking—welcome to disability. Can’t hold a job because your brain got fried—welcome to the unemployment system, Medicaid, and disability. Overdose--no worries, the ER will save you free of charge. Additionally, redistribution payments free up time for drug users. They don’t need to spend 8 hours a day working, so they can instead spend that time in a never ending search for stimulation, entertainment, and meaning. In many cases, the government even supplies the drugs directly in the form of cigarettes to military servicemen several decades ago, addictive pain medications for "pain" to their the people covered under their “insurance”, and marijuana—in some places—for pain and appetite stimulation and depression and anxiety and, well, there does not seem to be a limit on what it gets prescribed for. Anyway, these points--I think--compliment your concern without contradicting it, though they imply a different causal chain. You said your number one effort to help the poorest of the poor would be to end the drug war. I got the impression you were arguing to make drug use legal. I don't disagree, but I think the picture is more complex. I think you would get even better outcomes by removing the redistributive institutions that directly and indirectly encourage drug use and the institutions that transplant the risks of using drugs on to the rest of society. Once those absurd institutions are gone, legalizing drugs might actually lead to the beneficial outcomes you implied. Without removing the redistribution system first, however, I predict that legalizing drugs would increase poverty, not lessen it.

Finally, your thoughts on the prison population and its relationship to the bottom 1% is hugely important given that the USA has the largest prison population in the world yet considers itself the freest society in the world. Both cannot be true.

Lee Waaks writes:

@SaveyourSelf
Changes in behavior of the top 1% are unlikely to matter much given that they are such a small group--even if you assume they have an influence on the economy greater than their size implies. Furthermore, taking from the few to give to the many is theft, regardless of how small or wealthy the minority being robbed or how large or “poor” the majority benefiting. Theft is always unjust—which is to say, someone is getting hurt.

More important than the incentives problem is the fact that taxing the 1% is taxing capital (unless the tax can somehow be restricted to personal consumption only, which seems unlikely). Taxing capital reduces the productivity of the economy over the long-term and hurts everyone. See George Reisman on this topic in his book, Capitalism, pp. 300ff (and other sections), free online.

SaveyourSelf writes:

Lee Waaks wrote, "Taxing capital reduces the productivity of the economy over the long-term and hurts everyone."

Good point. I think that statement would remain true if you removed the word Capital so that it read, "Taxing reduces the productivity of the economy over the long-term and hurts everyone."

Thank you for including the citation with your remarks. I look forward to reading it.

Comments for this entry have been closed
Return to top